Utility Week

18 | 23rd - 30th September 2016 | UtILItY WeeK Finance & Investment F orty-eight days aer EDF made its final investment decision to go ahead with Hinkley Point C, and government countered with an immediate delay, the new nuclear power plant has finally been given the green light – although a conditional one. The £92.50/MWh strike price, falling to £89.50 if Sizewell B goes ahead, remains in place – much to the disappointment of oppo- nents who say this is far too expensive. The new condition has been placed on EDF and its investment partner China General Nuclear Power Group (CGN). This new deal means that EDF will not be able to sell a controlling stake in Hinkley Point C prior to the completion of the project without notifying the government and an agreement by ministers. This is designed to address the appar- ent security concerns that prime minister Theresa May has with the deal, which led to the most recent hold-up in a new nuclear saga, which has been running for almost a decade now. The rationale behind adding such a cause is clear, to ensure the 3.2GW power station is secure. However, the move also gives us an early indication of what May's new "indus- trial strategy" is going to look like. It may now be the case that the door is not always open to those with the deepest pockets, especially when it comes to big infrastruc- ture investments. Some pro-market commentators pre- dicted that the creation of a department for Business, Energy and Industrial Strategy would trigger high levels of government intervention in big business deals. The poli- ticking around approval of Hinkley suggests they were right and this will not be a wel- come development for all – a green light was given this time, but setting a precedent for intervention could see other projects blocked in the future. Of course, many would have welcome a negative decision on Hinkley Point C. The go-ahead from business and energy secre- tary Greg Clark was met with the expected mixture of delight (from the investors and the pro-nuclear lobby) and disgust (from opponents, who maintain it is an "expensive white elephant"). The anti-nuclear lobby will be especially perturbed because the new Hinkley deal sets out government's thinking on how to enable other new nuclear schemes. This includes a legal framework for establishing a "special share" for government in all future nuclear schemes as well as reforms to the way in which foreign ownership of critical assets is scrutinised. The latter reforms are targeted at maintaining national security, showing May's concerns about Chinese CNG's involve- ment in Hinkley are far from a one off. May is not making a shocking departure from international precedent in requiring such scrutiny, however. Jefferies equity ana- lyst Ahmed Farman told Utility Week these types of conditions are "fairly standard" inclusions by national governments. "For critical infrastructure where there could be any sort of security issues, this is fairly common. Where there is some huge for- eign investment coming in, the government wants to be protective. You can find numer- ous examples of this around the world." Bloomberg Intelligence utilities analyst Elchin Mammadov agrees. He told Utility Week: "These extra conditions are noth- ing extraordinary when you look at other countries like France who have used golden shares and other mechanisms when it comes Hinkley Point is Go The government has finally given Hinkley the green light, but with conditions attached. Mathew Beech reports. "This is good news for British consumers, a huge boost for British industry and a major step forward in the fight against climate change." Vincent de Rivaz, chief executive, EDF Energy "The final green light for Hinkley Point is good news for the UK's energy future as well as sup- porting jobs and growth across the South West and the country." Josh Hardie, deputy director-general, CBI "This is the right decision for the country and the government is right to ignore the begrudgers and naysayers." Justin Bowden, GMB national secretary for energy "While technologies such as solar, wind and batteries will also be hugely important in delivering the UK's future energy mix, new nuclear, starting with Hinkley Point, has a crucial role to play in displacing our reliance on fossil fuels." Tony Ward, head of power & utilities, EY "It is important to note that this is not the end but merely a small step at the start of securing our low carbon energy require- ments." Jenifer Baxter, head of energy and envi- ronment at the Institution of Mechanical Engineers "Nuclear energy is just one piece of the puzzle and it is critical that the UK adopts an energy strategy that utilises a mix of supply sources; from renewables to fossil-fired generation." Dave Cockshott, chief commercial officer, Inenco "It is a 20th Century solution to 21st Century problems. Bigger is no longer better. There are faster, cheaper, cleaner and smarter ways to deliver affordable, secure, low car- bon electricity to Britain's consumers. Tom Burke chairman, E3G "We urge the government to consider the costs and support other industries in which the UK could be a global leader, such as energy storage." Nina Skorupska, chief executive, the Renewable Energy Association Reaction Artist's impression of hinkley point C Analysis

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